Key Takeaways:
A fragile three-week ceasefire in the Middle East is near collapse after the U.S. began military operations to reopen the Strait of Hormuz, sinking six Iranian boats and triggering retaliatory strikes against the United Arab Emirates.
"The ceasefire is not over," U.S. Defense Secretary Pete Hegseth said, even as his top general, Dan Caine, described Tuesday as a "quieter" day in the strait.
The U.S. operation involves over 100 aircraft and aims to break a blockade that has stranded hundreds of vessels and cut off roughly 20% of the world's pre-war crude oil transit. In response, Iran launched 15 missiles and four drones at the UAE, with one drone wounding three workers at an oil facility in Fujairah, according to the UAE’s Defense Ministry.
The escalation puts global energy markets on high alert, as a failure to secure the 21-mile-wide waterway could prolong a spike in fuel prices that has rattled the world economy. The success of the U.S. initiative now hinges on convincing commercial shippers, who currently see the route as too hazardous to use.
The American effort, dubbed "Project Freedom," has so far escorted just two U.S.-flagged merchant ships through a new lane in Omani territorial waters, a stark contrast to the hundreds of vessels awaiting passage. Major shipping lines like Hapag-Lloyd AG have stated that transit is "for the moment not possible," reflecting broad industry skepticism. "For shipping companies and for insurance companies, they still have to wait and see how this plays out," said Torbjorn Soltvedt, an analyst at Verisk Maplecroft.
Washington and Tehran offered conflicting accounts of the clashes. A U.S. military commander said American forces sank six small Iranian boats that initiated "aggressive behavior" toward civilian ships. An Iranian military commander, however, claimed two civilian cargo boats were hit, killing five civilians, according to state TV.
The conflict has expanded beyond the immediate strait, with the UAE reporting its first direct attacks since the ceasefire began in early April. While Iran's Foreign Ministry spokesman denied striking the UAE "in recent days," Foreign Minister Abbas Araghchi warned on X that the U.S. and UAE "should be wary of being dragged back into quagmire."
Diplomatic efforts are underway at the United Nations, where the U.S. and Gulf allies have proposed a resolution threatening sanctions if Iran does not release its grip on the strait. U.S. Secretary of State Marco Rubio said the text was adjusted to remove language authorizing force in an attempt to avoid a potential veto from China and Russia.
This article is for informational purposes only and does not constitute investment advice.
